Kharif crop estimates for 2013-14

Indian agriculture is always under increased pressure on account of consistent population growth (Annual 1.53 per cent) and its extensive reliability on monsoon rains. In the recent times the impact of global warming has increased the uncertainty in both time and amount of rains in the monsoon season.

As per ESSO-India Meteorological Department (IMD), the Southwest monsoon seasonal rainfall for the country as a whole is most likely to be Normal (96-104% of Long Period Average (LPA)) with the highest probability of 46%. However, the probability for the seasonal rainfall to be deficient (below 90% of LPA) or excess (above 110% of LPA) is relatively low (10% and 3% respectively). Based on studies, a negative phase of IOD predicted in the later part of monsoon, predicted by JAMSTEC, Japan. Majority of the models indicate that El Nino 3.4 SSTs will remain near neutral ENSO condition. Operational/experimental forecasts prepared by international institutes like the ECMWF (Europe), NCEP (USA) ECMWF, APCC (Korea), Sintex /Jamstec (Japan), CDAC (Centre for development of Advanced Computing), IRI Columbia University (USA), ITEC(Japan, MRI (JAPAN) and EUROSIP (Europe) have all predicted the monsoon to be 103% OF LPA  for the period between June and September 2013.

Amidst expectation of normal monsoon, the Indian kharif crop scenario is likely to improve significantly. The total kharif foodgrain production is likely to improve by 8.09 per cent over last year to 135.00 million tonnes. Rice is expected to show an increase in area by 3.99 per cent and an increase of 5.13 per cent in production over last year. Among the oilseed crops, the overall production is expected to increase by 20.63 per cent over last year, in which the groundnut production to expected to increase significantly by 86.71 per cent over last year. In this current monsoon season the only crop with negative acreage and production over last year is likely to be sugarcane whose area is expected to decline by 6.27 per cent and its production is likely to decline by 0.42 per cent.

Development after Monsoon: Focus on Castor Seed

Indian economy is vitally linked with the monsoon because of its water resources. A large part of the country gets more than 75 per cent of the annual rainfall during the four months, June to September. Indian agriculture has been consistently facing increased pressure on account of population growth (Annual 1.53 per cent) and its extensive reliability on monsoon rains. Lack of improved irrigation facilities (only 45.2 per cent of the total cultivated area) has resulted in excessive dependence on monsoon and slight variation in the amount and timing of monsoon has serious impact on the overall food grain production of the country.

Why castor seeds prices jumped around 6% in spot market during May 31 and June 25 2013.

The major reason behind the rise in the prices is the expected export demand from China and European nations. India is the largest exporter of castor seed oil and exports 80% of its total castor oil to China, which is the world’s largest importer of Castor oil followed by US, Japan, Thailand and other European countries. Exports from India have been increasing at the rate of 7% year on year in the last 3 years. In 2011-12, India’s exported 404,489 MT of Castor Oil compare to previous year 343254: 40% of it to China, 35% to Europe and 11% to USA. As per Recent Data, Export of Castor Oil reached 67,000 MT for the month of June 2012, against the export of 59,000 MT for the month of May 2012.

What is the present production and consumption situation of castor seeds in India?

Castor is cultivated in 30 different countries on commercial scale, of which India, China and Brazil is the major castor growing countries accounting for 90 per cent of the world’s production. Historically, Brazil, China and India have been the key producing countries meeting global requirement. India is the leader in global castor production and dominates in international castor oil trade. Gujarat is the chief producing state, having a share of 77-80% of domestic production, followed by Andhra Pradesh and Rajasthan. As per our estimates, the total production of castor seed is expected to reach 12.70 lakh tonnes, an increase of 10.47 per cent over last year.

How monsoon can impact investment in castor seeds? Where do you see castor seeds prices by the end of the year 2014?

A normal monsoon is likely to support the castor seed crop and the production is likely to be on the higher side. As per the SEA estimates on 20.06.2013 the total area under castor seed was 0.19 lakh hectares against 0.04 lakh hectares. This figure itself shows that this year’s crop is going to be on the record high.

Investment decision in castor is considered to e a judicious one if you stay invested for whole the cropping season. Currently the prices are hovering in the range of 3200 to 3500. For the short term, no major upsurge is expected from the current levels, though the downside movement is very limited. If one is willing to stay invested for next 6 to 9 months, a price range of 4500 to 5000 can be expected.

Technical Analysis & Recommendation

 The trend in castor Seed is bullish. As per the chart February month is expected to test the levels of 4779 & 5080 on the higher side. It is advisable to enter fresh buy could be initiated at Levels between 3900 - 4000 (CMP 4386) with major stop loss @ 3480 levels.